The announcement in mid-December by President Obama and President Castro that Cuba and the US are moving to normalise relations has resulted in speculation about what this may mean for the Caribbean’s tourism sector. For the most part what has been said and written has failed to understand the nature or complexity of what the US President has proposed, the process involved, or the fact that Cuba has revealed very little about what its detailed response will be.
That said, the news of a changed US-Cuba relationship is of course welcome, long overdue and begins to end the US imposed isolation of a Caribbean nation. It involves the full restoration of diplomatic relations by both sides and includes a range of measures for which the US President does not need the approval of Congress.
Although the US President made clear that when it comes to US travellers more US citizens will be able to visit Cuba under what is expected to be looser licensing arrangements, he was not freeing all individual US travel to Cuba. Instead the implication is that the granting of licences to travel in twelve identified US Treasury permitted areas* will be made easier. He also said that US credit and debit cards will be permitted for use by travellers to Cuba; US companies will be able to improve infrastructure linking the US and Cuba for commercial telecommunications and internet services; and according to a fact sheet accompanying his statement, foreign vessels will be able to enter the United States “after engaging in certain humanitarian trade with Cuba.”
Sometime in the coming weeks the new US Treasury regulations on Cuba will be published which will spell out how these and other aspects of the new US travel regime will work. However, the present consensus in the US travel industry is that in future a general licensing system will enable tour operators to develop programmes within identified categories such as educational activities, and US citizens will then be able to freely buy and travel within such packages on the basis they are giving the US Government their word they are not simply engaging in tourism.
How this will work in practice and the extent to which current draconian US rules on the use of currency, or whether Cuba has the facilities or is geared up to receive many more visitors on this basis, remains to be seen.
Of more fundamental importance, although not directly related to tourism, was the announcement that President Obama was authorising his Secretary of State, John Kerry, to review, based on the facts, Cuba’s US designation as a state sponsor of terrorism. A change in this area would not only enable companies in the tourism sector, but in every other sector as well to be able to freely move funds in US dollars, invest, trade, book hotels or flights on airline web sites on US servers, and much more.
The increasingly tough interpretation by the US Treasury in the last few years of regulations that flow from this designation has severely constrained all third country trade and services, including from the Caribbean, as many companies and international banks have withdrawn from the Cuban market in order not to face huge fines in relation to the transfer of funds.
What happens next in practical terms may be slow and uncertain. However, it is clear that President Obama has initiated a process that he thinks will be sustainable beyond any Democrat administration. Although not spelt out it would seem that he calculates, in the case of Cuba, that freer US travel and the weight of US corporate interest may force an unstoppable economic opening that a Republican dominated House and Senate or any future Republican President will not wish to turn back.
For his part, President Castro has made clear that Cuba will work with the US to improve relations but that that his country’s principle focus will be on an improved economic relationship and functional co-operation. What this means is that while US tourism (or more precisely the number of non-Cuban-American US visitors travelling to Cuba) will remain constrained for the time being, there could be a quite sudden opening in between two to four years’ time, but only if that is what Cuba wants.
In this context the most likely changes in the short term related to tourism are increasing pressure on the number of hotel rooms in Havana and popular destinations, and an upward trend in Cuba’s presently low room rates; increased investment in the hotel sector by foreign companies, particularly in conjunction with military controlled tourism companies; pressure from US legacy carriers to fly scheduled services to Cuba out of the US; the increased attraction of sailboats into the newly completed marinas that Cuba has been constructing; an increasing number of calls by non-US cruise ships and perhaps in time US cruise ships if they home port in Cuba; and the rapid diversification and decentralisation of Cuba’s already significant tourism product.
Speaking recently in Barbados about the opportunity, the Caribbean Tourism Organisation’s Secretary General, Hugh Riley, said that contrary to the fears in some parts of the region, the strengthening of Cuba as a Caribbean tourism destination was good news as it would attract more visitors into the region and could prove a gold mine for those willing to capitalise on it. The region, he said, needed to view normalised relations from an entrepreneurial point of view to determine how it could strike partnerships that would allow it to benefit. The figures amplify Mr Riley’s point. While overall visitor arrivals totalled 2.8M in 2013 – the spend was US$2. 3B – Cuban official statistics record that only 92,000 US citizens visited Cuba that year, a figure that does not include another 350,000 to 400,000 Cuban Americans who visit annually as Cuba does not consider them as visitors.
President Castro and President Obama both noted that the agreement to normalise relations would be challenging and take time. The announcement of an improved US-Cuba relationship is therefore best regarded in tourism terms as the starting gun for all Caribbean tourism interests to consider how, over time, they will respond to increasing competition for the US market.
*These are family visits; official business of the US government, foreign governments, and certain intergovernmental organizations; journalistic activity; professional research and professional meetings; educational activities; religious activities; public performances, clinics, workshops, athletic and other competitions, and exhibitions; support for the Cuban people; humanitarian projects; activities of private foundations or research or educational institutes; exportation, importation, or transmission of information or information materials; and certain export transactions guidelines.
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